Calling Female Founders to Join The Startup Genome Project!

The
Startup Genome is looking for a critical mass of women to participate in the
Startup Genome Project in order to aid their discovery of the DNA of women- led
startups. By joining the project, you will be adding the dimension of
quantitative data to their quest.

The
Startup Genome has already learned that approximately 70% of the startups in
their dataset scaled prematurely. I am very interested to see if the same
pattern holds for women, because through the interviews I have conducted over
the last year, the consensus has been that women tend to be perfectionistic,
moving slower but more surely than their male counterparts. Is it possible that
the more careful nature of women may cause them to fail less?

We shall
see what the data reveals, but the Startup Genome Team reminds me that while
women may be more likely to avoid premature scaling, they may fall prey to
"dysfunctional scaling", a problem that occurs when entrepreneurs
fail to step on the gas pedal once the product has been validated.

For over
a year I have been video interviewing venture capitalists, angel investors and
women founders trying to investigate the apparent shortfall in funding for
women led technology startups. My goal has been to listen to as many
people as I could from both sides of the table, in order to get a diversity of
opinions on this controversial subject. Whilst I have been doing these
interviews, many people have said to me that no problem exists and that women
can be as easily funded as men if they have a great idea, team, plan and
advisors. However the statistics show another story. The percentages
of women in technology, female entrepreneurs and female venture capitalists are
extremely low compared to men. But the reasons are multifold and complex
and cannot be resolved quickly or easily. With this post I hope to shed
some light on the intricacies of this issue.

Following
are some of the strands of DNA I have identified through the 130 interviews I have conducted over
the last year.

Is There a Problem for female entrepreneurs?

Many people have said
to me that no problem exists and that women can be as easily funded as men if
they have a great idea, team, plan and advisors. However the percentages
of women in technology, female entrepreneurs and female venture capitalists are
extremely low compared to men.

Is There Overt Discrimination?
Many suggested that
there is no conscious bias on the part of investors but that we all naturally
feel more comfortable with those who are similar to us. Investors are looking
for low risk and high reward. If someone is dissimilar to them and they do not
understand them, they may see them as a riskier investment and decide to pass. True to the law of you get in what you put out; many suggested that
if you act as if there was no overt discrimination, then you may be less likely
to be discriminated against. However women may tend to keep mum about
discriminating behavior by men in business in order to protect their
credibility and careers.

Does Bias Keep Women Disadvantaged for Investment?
Studies suggest that
we all have unconscious bias and that of course then can affect female
entrepreneurs when raising investment due to their low numbers. Some suggested
that there were fewer obstacles to raising funding through other means for
women rather than venture.

As a result, larger percentages of women are raising
investment through alternate means such as crowd sourcing, debt, friends and
family etc, than are attempting to raise venture capital.

Successful women may also strive to
succeed through their own merits in an effort to support the notion that there
is no gender bias.

Are there Advantages of Diversity?
There have been
studies done about the advantages of diversity and many people spoke about how
startups, just like corporations can produce better results by having a diverse
executive team and board. It was suggested by some that having women on the
executive team of a startup would help the company better understand and serve
their customers because the internal team composition would better mirror the
composition of the target market. Women
also bring stability to teams and greater creativity through providing
perspectives that often differ markedly from men.

Should we generalize about Gender?

Many of those
interviewed baulked or apologized about making generalizations about gender but most did just that at some point
in the conversation, including myself.

Unfortunately, it's very difficult to discuss
issues about men and women without generalizing, as it is something we all fall
back on when we try to make sense of those dissimilar to us.

Are there differences between Men and Women?
Despite that fact, I
will mention some generalizations that people discussed. We all
acknowledge that men and women are different, not just physically but our early
training and roles deliver a different version of life. There are also
many studies on the fact that our brains are wired differently along with the
fact that we are ruled by different hormones. It was suggested by many,
that women generally perform better with human factors in business and often
attribute their success to others. Due to their varied roles and
responsibilities they also seem to be able to manage both home and business
well. Women may tend to take business more seriously than men. However
it was also suggested that women can be just as competitive and ambitious as
men, particularly when that is encouraged and supported.

How does the Female Demographic Impact Investment?
The female market is
huge particularly in online businesses and drives a lot of revenue. Women
are also a tougher market to target as they are more demanding. Therefore having
more women in startups could mean better insight into customer needs, which
could allow those startups to serve those markets better and achieve greater
success than their peers.

Female Entrepreneurs
Are women even
interested in becoming entrepreneurs? A great many small businesses are run by
women, about 50% in the US. So why are there less technology startups led
by women? It could be that women have to make adjustments to
adapt to the greater demands of the lifestyle of a high growth technology
entrepreneur. Women have
been proven to be good credit risks and are a major force now in in the upper
management in the Fortune 500, so perhaps tech entrepreneurship is just one
more area where women will soon prove their equal competency to men. There could be a new focus on the
strengths of women in business to counteract old erroneous images in the
culture and to encourage more women to become high growth technology
entrepreneurs. In
the startup world there is a certain stereotype of the type of founder that
investors love to fund: young, white, male and geeky.

Female entrepreneurs need to
challenge this stereotype by showing that they possess alternative approaches
to solving problems that can make for great startups and disrupt industries in
new ways.

Raising Capital
A lot of feminine
strengths may not match up to historical and portraits of successful
entrepreneurs. This could mean that some women may need to learn skills
and shore up certain qualities to be a good fit. Many spoke about the
need for great female entrepreneurial role models and mentoring of women both
by men and women, which includes peer mentoring as well. Women entrepreneurs
may also need to learn about the venture and angel industry and to identify the
best investors to whom they should pitch their startup. There are now
many women friendly investors, many of whom I interviewed. It is helpful
for women entrepreneurs to grow their networks and to get to know investors
before stepping up to the plate to raise investment capital. This can
help a female entrepreneur’s general confidence and help her identify the best
avenues for her to target. Here are some interesting stats on women who
raise venture from a 2007 survey by British Researcher Library House:

women
ask for exactly what they need in capital and end up with half what they
require from investors

men
tend to ask for twice as much venture in hopes of getting half from
investors

female
CEOs delivered higher revenues using less capital than those by men

the
average venture backed company run by a woman has annual revenues 12%
higher than those by men using on average one third less capital

Female Venture
Capitalists
Female venture
capitalists are a very small percentage of the venture industry. It was
noted that many successful entrepreneurs become venture capitalists later in
their careers. Due to the small numbers of female entrepreneurs this has
limited the number of female venture capitalists. This funnel is a
problem. Increasing the numbers of female entrepreneurs, may in turn increase
the numbers of female venture capitalists, starting a virtuous cycle.

If investment firms also mentor
more women and encourage them into their ranks this could also kickstart the
cycle that could get women into the startup ecosystem.

Advantages of Being a
Female Entrepreneur
One of the current
advantages of being one of the few female entrepreneurs is that you are noticed
and often remembered more than men. If an investor is conscious of bias then
this could become an advantage. If women entrepreneurs can deliver the
necessary requirements when pitching and develop the qualities that investors
are looking for, then their minority status could make them more
likely to get funded as investors look for undiscovered gems that other
investors overlooked.

What do Female
Entrepreneurs have Going for Them?
Consumer internet
already has a number of successful women and this may be an area that women
feel comfortable leveraging their strengths to create successful startups.
If
women can learn to better leverage their strengths: networking, forming
fabulous teams and advisory boards, and managing their businesses with
resourcefulness and creativity, they could become very proficient at playing
the startup game.

Importance of Being
Yourself

It was stressed by
most investors and founders that it is crucial to the success of a startup and
raising funding to be yourself.

Being a minority, women may feel under
pressure to act like men, but most of the people I interviewed encouraged female
entrepreneurs to remain authentic and not to try to act like men when trying to
raise money. It does not help
anyone’s confidence and sense of presence if they are not relaxed and
comfortable with who they are, no matter their gender.

Potential Challenges
Women's receptivity
to others may at times undermine their confidence and they may not come across
as brash as some men. However a positive focus for themselves and their ideas
along with encouragement from others can easily change this issue. It was
also noted that extreme aggressiveness is required to achieve success in
business. This may be a key factor that holds some women back as this may
not be a natural response for some. Women may often tolerate unfriendly or unsupportive
people for too long. There may also be a challenge for women in their style, finding a middle
path between being empathic and warm and making tough decisions. It is of
course possible for women to learn to become very flexible in these different
modes of operating or feeling. Inner strength and confidence raise awareness of
this propensity and skills such as assertiveness, active listening and
negotiation can be learned.

Importance of
Confidence
Everyone spoke about
the need for extreme confidence and passion in entrepreneurs when building
their businesses and raising capital. Women often attribute their success to
others or circumstances outside of their control and may not focus enough on
building their
sense of self-efficacy. Our training and culture encourage us to put others first, as the
principal care takers in the community. It is helpful to stay objective
by focusing on your traction and market to show investors that your startup can
succeed. Having the necessary requirements to inspire confidence in
investors and knowing the data well can be a big confidence boost.

A
healthy ego makes for a balanced person and a great business.
Overconfidence and brashness may be confused with authentic confidence
but many investors suggested that brashness can be a turn off and doesn’t
necessarily inspire confidence!

Women are often great consensus takers
but ultimately a good CEO will be able to make her own decisions after
listening to her advisors.

Risk and Failure
Many people that I
interviewed suggested that women can be more risk averse than men. Risk
always implies the possibility of failure. Women may take risk more seriously
because failure often feels like a life and death matter to them. If
women are not exposed or interested in sports when they are young, they need to
find other ways to support them in being willing to accomodate risk and failure
and at times to even enjoy the thrill. Women need to be encouraged to
find their competitive expression without damaging their ability to be
receptive to others.

Think Big – Scale
your Business
Whereas many men have
big dreams, women may tend to ‘think too small’. This may stem hormonally
from our primary focus on the immediate people in our care or responsibility.
Historically big picture thinking and exploring may have just been the
domain of the male hunters. However this can easily be learned and
changed if needed. Women’s sports and working on teams can provide
confidence in winning and losing on a big scale.

Don’t be Afraid to
Ask for Money
Another big issue
that many brought up, is that women don’t like to ask for money. This is
a huge problem if you are an entrepreneur that needs to raise money.

You
definitely have to become comfortable with asking for money! There seems
to be something deeply ingrained in us as women that we should do what we can
with what we have.

Possible Hindrances
Then there is the
challenge of the intensity and crazy lack of balance in startup culture that is
not appealing to many women who value their family and personal lives.
This necessitates women’s organizations and networks, along with
individual female entrepreneurs developing their own version of startup
culture. Creativity is necessary to match the time demands and pressures.
A few mompreneurs spoke about thinking outside the box and solving these
problems.

Sex and Power

One of the big
differences for female entrepreneurs is the physicality of their gender. Some
had been propositioned by investors.

It is important that both investors and
women keep clear about sexual boundaries in the pitching process. Everyone
needs to understand that funding is based on merits of the startup and team.
However when chemistry does happen between people who are looking to work
together, it can easily be mistaken for sexual chemistry because it comes from
the same place in us, our passion! Rather than pretending this important
part of the creative process doesn’t exist or misinterpreting it by fearing it,
literalizing and acting out sexual innuendo or relationship, investors and
women entrepreneurs need to respect and honor this chemistry so that they can
work together successfully. Investors need to take this risk along with the
financial risk when they invest in a female entrepreneur and know that this
fertile energy can be harnessed to build a great business. Female entrepreneurs should not be
afraid of the power of this chemistry and its transformative affect on them and
their business.

Children
Female entrepreneurs
may choose to segment their careers around child rearing ages before and after
but it is important that investors do not prejudice their choices in funding an
entrepreneur on supposition that they will abandon their business to start a
family.

For female entrepreneurs it is important to address the elephant
in the room (as Mark Suster suggests) and update investors even before they ask
about how they have decided to prioritize their business and family life.

Helping Other Women
Many people suggested
that things will change when more women help other women. Most women are
juggling a lot on their plates but that does encourage empathy for others in
the same boat. There are already some great organizations that support female
entrepreneurs like Astia, Pipeline Fund and Women2.0. However it is on
each one of us to do what we can for other women as we move forward. The female
startup ecosystem will only become stronger and therefore will be more
conducive for meritocratic funding. There are also a few great
organizations worth mentioning that encourage and support young girls to study
science, math and engineering like NCWIT and Anita Borg Institute.

Investors' Position
The role of a venture
capitalist is fund and advise startups to become successful and profitable
businesses. It has become something of a cottage industry with
its own unique culture. As with the startup culture, it is composed mainly of men and
even though they deal with risk in a major way, it has been shown to be an
industry that is slow to change. Limited Partners who provide the funds
to venture firms are resistant to change and insist on continuing with a model
that is possibly broken. As Chris Dixon said to me “They're people that
work at pension funds and endowments and just like in any situation where
somebody is investing on behalf of somebody else, there's what economists call
'agency problems'.”

Despite this additional challenge in the industry, the one
constant that we all face is change and the venture industry will not be immune
to this force of nature, particularly as it hits the bottom line. All the
venture capitalists that I interviewed were open and willing to invest in great
female founded ventures. Some have already discovered the benefit and
advantages of being ahead of the pack and are deliberately investing in great
women led startups. And of course venture capitalists and angel investors
will ultimately benefit more when there are greater numbers of female startups.

Disadvantages of
Investing in Similarity
Because women think
differently and see the world through different eyes than male entrepreneurs
there may be great opportunity now. If we encourage openness with
each other and respectful networking, then all will benefit. This path
could also play a major role in improving economies in the western world which
are suffering from the type of brash male dominated thinking
that triggered mortgage crises and the ensuing financial collapse.

Accessing the untapped potential
of more venture backed female entrepreneurs could be a critical missing piece
to creating the prosperity we all want.

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offering our community a support infrastructure critical for success.

About TNW

The NextWomen is a community of Investors, Entrepreneurs & Advisers. We build formats to support the growth of female entrepreneurs -from
startups to companies making millions. We provide access to capital, resources and networks,
offering our community a support infrastructure critical for success. Join the community too! - See more at: http://www.thenextwomen.com/about-us/contributors#sthash.9GODHllB.dpuf

The NextWomen is a community of Investors, Entrepreneurs & Advisers. We build formats to support the growth of female entrepreneurs -from
startups to companies making millions. We provide access to capital, resources and networks,
offering our community a support infrastructure critical for success. Join the community too! - See more at: http://www.thenextwomen.com/membership/sign-up#sthash.0ApND3BW.dpuf

The NextWomen is
a community of Investors, Entrepreneurs & Advisers. We
build formats to support the growth of female entrepreneurs -from startups to
companies making millions. We provide access to capital, resources and
networks, offering our community a support infrastructure critical for success.